Commonwealth Magazine continues to be the most well-written, well-investigated publication covering Massachusetts.
An article in the Winter edition described how the state is making extra money when lottery winners take a smaller lump-sum payout rather than the per-year option. Â Why would these winners leave money on the table? Â “Our players were not doing very well on the open market.”
It’s almost as if she’s suggesting that people who play the lottery are bad at making decisions about money . . . .
Enh. Not impressed at all. That CW article is rather facile.
There’s no a priori reason for someone’s personal discount rate to be same as MA’s discount rate. If my discount rate is higher (maybe I want to start a business and need the lump sum, or I have a low life expectancy and want to enjoy the $ myself rather than letting my heirs have it, or a whole host of other, quite legitimate reasons) then the NPV to me of the annuity could easily be less than the value of the lump-sum payout and therefore it would be quite rational for me to take the lump-sum.
I agree that it is better to get it in a lump sum. BUT. I would recamend that they get conservitive financal advice first. In most cases the full payouts after taxes are abought 30% of full value . If people would make 7.2% or more and live on 4% or less they will do very well and have abought the same amount after the 20 years or more for the payments full amount.